Friday, August 01, 2014

Paul Ryan's poverty plan signals an ideological shift

A few days ago, Republican Congressman Paul Ryan released a plan for helping people out of poverty. He unveiled the outlines in a talk at the American Enterprise Institute, a Washington-based think tank that seems to have emerged as the intellectual center of the so-called reform-conservatism movement. The plan involves making large block grants, called Opportunity Grants, to states, and instructing them to implement a raft of antipoverty programs. The most innovative of the programs involves having social workers directly help poor people take concrete steps to improve their lives in a number of dimensions.

As soon as the plan was released, a lot of liberal-leaning writers began to criticize it. Ezra Klein complained that the poverty plan would conflict with Ryan’s own deficit-cutting proposals:

Ryan's budgets and his poverty plan aren't merely different. They're flatly contradictory. They cannot be implemented in the same universe at the same time. His budget, for instance, cuts deep into the funding stream that powers the Earned Income Tax Credit. His poverty plan sharply increases spending on the Earned Income Tax Credit. His budget cuts deep into food stamps and other income-support programs. His poverty plan holds their spending constant...Ryan's poverty plan can be seen either as an effort to move the Republican Party forward on poverty or as a Trojan Horse-like effort to achieve his budget's goals by other means[.]

Paul Krugman dismissed the plan outright, saying anything that comes from Ryan can’t be trusted. Emily Badger wrote that Ryan’s punitive, deadline-based approach to personal assistance is inconsistent with what we know about how poor people make decisions. Annie Lowrey called the plan too paternalistic, labeling it “condescending and wrongheaded.” And Jamelle Bouie wrote that what the poor really need is not a “life coach,” but more money.

This is just a small sampling of the negative responses from writers on the left. Only a very few struck a positive note, such as Matt O’Brien, who pointed out some elements of Ryan’s plan that should please liberals.

These reactions are understandable -- Ryan has made a name for himself as an idea man, but this usually entails releasing plans that look bold but won’t work. And many of the criticisms liberals make represent real shortcomings of the plan -- for example, it’s clear that overall funding for poverty reduction would have to be increased substantially if it was to work.

But liberals are being much too quick to bash Ryan here. Ryan’s plan, which is being hailed by conservatives and Republicans, potentially represents a huge tectonic shift in the conservative movement’s -- and the Republican Party’s -- approach to the problem of poverty.

First, there’s the recognition that material poverty is important. Until recently, when confronted with the issue of poverty, conservatives often tended to sniff that the American poor were much richer than people in other countries, that relative poverty was just a product of envy, or that what the poor really needed was spiritual, not material, improvement.

Ryan’s plan reflects a different attitude. It recognizes that chronic unemployment and underemployment are personally destructive and a drag on the economy. It expands the EITC, which is a way of writing poor people a check. It focuses on getting poor people better jobs, higher incomes, even some additional education. The idea of personal responsibility and good behavior is still there, but now it is treated as a means to an end, and the end is better material well-being.

Second, and even more importantly, Ryan’s plan represents a sea change in the way Republicans see the role of government. In his first inaugural address, Ronald Reagan famously declared: “In this present crisis, government is not the solution to our problem; government is the problem.” Over the next 2 1/2 decades, Republicans and conservatives tended to drop the “in the present crisis” part. They’ve treated government as an obstacle to human welfare always and everywhere, instead of a tool that can sometimes be used to improve things.

Ryan’s plan is the first glimmer of a big awakening on the right -- the realization that the crisis we now face isn't the same as the one we faced in 1981. Perhaps a decade-and-a-half of falling real incomes and falling mobility has finally cracked the hard shell of triumphal post-Reaganism. If so, the fear that the conservative movement would degenerate forever into obstructionist self-parody -- that the Tea Party is the future -- has proven unfounded.

Think about it: In 2014, the Republican Party’s main idea man -- who just two years ago ran for vice president on the same ticket as a man who called the poorer half of America “takers” -- is now proposing to use a government bureaucracy to send social workers to help poor people make more money, while simultaneously mailing them government checks. That is a big, big deal. Compared with that epochal shift, the particulars of Ryan’s plan hardly matter.

Right, just like the members of the Walton family (as opposed to the foundation) who have a combined wealth of 100+ billion, and give almost nothing. http://www.forbes.com/sites/clareoconnor/2014/06/03/report-walmarts-billionaire-waltons-give-almost-none-of-own-cash-to-family-foundation/

His proposal is for it to be revenue neutral, though it makes as little sense as his budget proposal. So much for increased spending. More likely this is the route to his budget plan. Dollarize benefits and allow them to shrink over time. More than this though is to provide some paper to be waved around to quell questions, 'we have a plan'.

I think Noah's main point should not be ignored: there is an ideological and policy shift in the mainstream Republican party. No matter how it's dressed up or what form it takes, a government-led outreach to help the poor is far, far from what the Republican mainstream has been since Reagan convinced the nation "Welfare Queens" were taking their money.

Why is this happening? I don't think politicians facing reality is a good enough answer, although it might be part of the case. We've also seen an ideological shift in a large part of the Republican party to be more accommodating to Hispanic immigrants (George W. Bush was the first in this wave).

It's no surprise that both Hispanics and the poor are also a growing voting block in the U.S. This is classic pandering: Ryan wants to try to get the votes of the poor by convincing them he's on their side. Thus I think Krugman may be right: don't trust the guy.

I really, really wish this had a chance of being true, Noah. But one "plan," put forth by one guy, one time, that hasn't yet gotten a vote, and doesn't have any actual numbers in it? And you think this, all by itself, represents an ideological shift?

Here's the ideology of Republicans right now: "Rich people need to be rewarded. Poor people need to be punished." As long as we are kissing up and kicking down, everything is as it should be.

The Ryan plan will add new forms of punishment, new ways to meddle in the lives of poor people, new opportunities to make them feel bad about themselves. To that extent, and to that extent only, I expect it to be popular with the Republican base.

A few predictions:

(1) the only elements of Ryan's plan that will go anywhere with the base will be the ones that can be sold as punitive.

(2) Six months from now, nobody will be taking this plan seriously

(3) For the next 10 years (or more), pundits will keep (wrongly) proclaiming every new thing that comes down the pike from the Republicans as an important change in their thinking. They will continue to be wrong, and will somehow forget that every similar prediction they have made has been similarly wrong.

So, now we will have barely qualified social workers going about advising or teaching how to get out of the poverty with powers to authorize payments to... Crap! More red tapes and more places for abuse... Besides, who is going to audit these social workers who are likely to be may be a step away from falling in poverty...

Ryan's plan empowers the states to distribute "knowledge" and "money"! Where will it go? To those who do not need it.

It would be much better to restart WPA and get these people working to improve infrastructure and environment... You would be surprised how fast they will become talented to find a more meaningful work. Giving out money to able body people without any thing in return is the problem.

Ryan: The Safety Net: Instead of helping people look for work, many federal programs end up discouraging people from finding work.

jbakho: This is "the takers don’t want to work" BS. People want to work. There simply are not enough jobs for everyone who wants one to have one. There is plenty of work that needs to be done. Simply providing money to hire people teaches job skills, builds resumes, builds contact with employment network. The cheapest thing you can do is mail a check. Creating jobs, may give better long term returns but they cost more money in the short run. Republicans are too cheap to support this.

Ryan: One of the most effective anti-poverty programs is the Earned Income Tax Credit

jbakho: EITC does not help people who cannot find a job. EITC is only effective if the BigG invests the money in full employment, which Ryan is against. The EITC helped many people under Clinton. It helped fewer people under GWBush because Bush did too little to get the economy back to full employment.

Ryan: Education: The federal government can expand opportunity by expanding access to education. But far too often it restricts that access, such as by stoking tuition inflation. This proposal would give states more flexibility with federal education and job-training programs in exchange for more accountability. It also would simplify the current pile of higher-education programs into one grant, one loan, and one work-study program. Finally, it would spur more innovation by opening up the accreditation process.

jbakho: I agree that current education programs stroke tuition inflation. Ryan does not understand tuition inflation. What he proposes is counterproductive. Before Reagan, the money went to support low cost (or even free) tuition at State Institutions. Reagan changed that to allow money to “Follow the Student”. Now Public institutions must compete with Private institutions for students. Cost is only a minor part of the competition. Most compete based on amenities and rankings and this is driving up costs. Only a return to fully funding Public Institutions can drive tuition costs down. This will be hard to unwind. Relaxing accreditation is counterproductive. For profits already have the lowest graduation rates and a degree from a non-accredited institution can be a liability and barrier to advancement. People should be able to get training for a reasonable cost. It is not reasonable to let College LoanSharks and ForProfits skim obscene amounts of money that should instead go to education.

Ryan: Criminal Justice: A growing body of research exposes the high costs of incarceration.

jbakho: This is one part of his plan that makes sense.

Ryan: Regressive Regulations: ??

jbakho: I have no idea what he is talking about. Exempt food carts from health inspections? Simplifying the tax code by getting rid of special interest tax breaks and charging a lower rate might help. Special interests will NOT allow this to happen.

Ryan: Results-Driven Research: This proposal calls for a commission...

jbakho: Another commission would be a waste (Think Bowles-Simpson). The best antipoverty program is a job. A full employment economy lowers poverty. We know what works. Republicans are too cheap to enact the type of jobs programs that would work.

The Ryan Plan mostly shifts money to fit ideology, not because shifting the money would solve a problem. To Ryan and the GOP, the problem is not that poor people need help from BigG. Ryan and the GOP believe that BigG spending money on the poor IS the problem, both the amount and the way it is delivered. So he looks for ways to shift spending that gives ideologues more control (block grants) without bothering to address the real problem.

Predictions (hypothetical because this is deader than dead-on-arrival with the GOP caucus):1. The block grants will be too small and unindexed to either the business cycle or to inflation.2. They will be handed to fantastically corrupt state governments that who will proceed to farm them out to unaudited contracts with their campaign contributors.3. These contractors will skim the cream off the top, pay the social workers crap, and provide no useful services.4. To the very limited extent that this program will work, there will be a race to the bottom as states try to incent their poors to leave.5. This failure will then, for the next 30 years, be used as a proof that government can't do anything right.

Paul Ryan has been blaming the poor for their circumstances for years. He thought the solution to the recession was to cut spending and balance the federal budget in the middle of the crisis. He puts out budgets year after year based on completely unrealistic expectations of future growth. He went right along with Romney and his belief that 47% of american's are moochers.

I think Paul Ryan is trying to trick people into thinking he is a decent and caring republican. He is basically a professional scam artist.

Block grants are a way to cut spending and hand favors down the line back to the good 'ol home district. Noah, don't be so naive. It's a little disconcerting. I'm writing this as my TV seems to be running non stop ads paid for by the Koch brothers, or the Club for Growth, or God knows what corporate treasury, or billionaire largesse here in tiny New Hampshire. As someone who has followed politics for 47 years (never missed a vote) I can confidently proclaim that we are now an official oligopoly and we've officially lost our previous right to a free election. Poof. Gone away.

Assuming Noah is right and Ryan is signalling an ideological shift, the best thing the left and liberals can do is denounce the plan. This will provide cover for Ryan to attempt to continue his shift without being seen as selling out to the left.

This, from Jesse Rothstein is a really important critique of the EITC that is so obvious I feel embarrassed it's not talked about more, especially by economists, who should know better (http://www.nber.org/papers/w14966):

The Earned Income Tax Credit (EITC) is intended to encourage work. But EITC-induced increases in labor supply may drive wages down, shifting the intended transfer toward employers. I simulate the economic incidence of the EITC under a range of plausible supply and demand elasticities. In all of the scenarios that I consider, a substantial portion of the intended transfer to low income single mothers is captured by employers through reduced wages. The transfer to employers is borne in part by low skill workers who are not themselves eligible for the EITC and are therefore made strictly worse off by its existence. I contrast the EITC with a traditional Negative Income Tax (NIT). The NIT discourages work, and so induces large transfers from employers of low skill labor to their workers. With my preferred parameters the EITC increases after-tax incomes by $0.73 per dollar spent, while the NIT yields $1.39.

That is to say, the problem with poverty programs that encourage work is that they encourage work: they shift out the labor supply curve, decreasing wages for other low-skill workers. For low-skill workers ineligible for the EITC (men without dependent children, for example), the policy provides harm without any offsetting benefit.

That's not to say that encouraging work under many circumstances might be a good thing-- but when wages for low-skilled workers are already as low as they can get, it may not be nearly as good as just straight cash transfers.

It is interesting that liberals like the Scandinavian model, except when it is adopted by conservatives. Both Sweden and Denmark assign social workers to work with the unemployed and I do not see why this cannot be extended to the poor in general. Rich folks often turn to "life coaches" for help. Poor folks cannot afford to do so, so I do not see what is paternalistic about showing some interest in their lives rather than handing them a stack of dollars and asking them to come back next month.

When it comes to math, I'll take Krugman over Ryan any day. I can't wait to see what Scott Walker will do with a block grant.

The best cure for poverty is higher wages. The GOP has it backwards. The real problem is that fellow Americans are too willing to work for lousy wages. If we let legit service jobs be underpaid, then we should pony up for the gov benefits.

Block grants are a partial argument. The Federal government has a role to play to insure that a minimum level of services are provided across all states. Otherwise, you're open to a race to the bottom.

Also, you seem to miss the entire point. Ryan is talking about relative poverty. An increase in all wages by the same rate will have little impact on the share of the population that live in relative poverty.

Only as a necessary condition for increased wages to be affordable. But not as a sufficient condition of wages actually increasing. Profits depend on productivity. But if a company's owners aren't compelled by some other forces (e.g., a restricted supply in the labor market, or minimum wage laws, or strong collective bargaining power on the part of workers, or their own personal concern for their workers), workers' increased productivity is far from any guarantee they will get higher wages as a result of those increased profits.

"There have been great increases in worker productivity since the 70s, they just weren't captured by workers."

This is not true. Until about 2000 the relationship between the growth in real hourly compensation (which includes the cost of benefits) and in productivity is quite strong, provided one uses the correct price deflator.

The best collective bargaining power is a low unemployment rate, which is the result of high productivity relative to wages. Nothing convinces an employer to give you that raise as well as the fear that if they lose you it will be very difficult for them to replace you.

"This is not true. Until about 2000 the relationship between the growth in real hourly compensation (which includes the cost of benefits) and in productivity is quite strong, provided one uses the correct price deflator."

Noah: "These reactions are understandable -- Ryan has made a name for himself as an idea man, but this usually entails releasing plans that look bold but won’t work. And many of the criticisms liberals make represent real shortcomings of the plan -- for example, it’s clear that overall funding for poverty reduction would have to be increased substantially if it was to work."

Wrong. Ryan has released many fraudulent plans. What elements were real were hardcore rightwing ideas, which would push money upwards.